World Bank tells Russia: Simplify laws to draw foreign investment

MOSCOW, March 25 (Reuters) - Russia needs to untangle a complex web of laws and foster a business culture that gives investors more security if it wants to attract foreign direct investment again, a World Bank official said in an interview.

FDI has waned since the West imposed sanctions in 2014 after Russia annexed Crimea from Ukraine, extending them several times since then.

It slumped to $1.4 billion in 2020, its lowest since 1994, from $28.9 billion in 2019, according to the Russian central bank.

“The benefits need to be extremely high for investors to even start considering putting their money into Russia,” Renaud Seligmann, the World Bank’s country director in Russia, told Reuters.

“But if you look at the fundamentals, everyone is looking for yield and Russia is a place where that yield ... does exist.”

Russia’s economy is on track to grow by around 3-4% this year after shrinking 3.1% in 2020 amid the COVID-19 pandemic and a slump in prices for oil, its main exports.

Seligmann said legislative hurdles currently prevent investors from seamlessly moving money into Russia.

“Having a consolidated investment law that clarifies the institutional framework, the investment entry, the protection rules for minority investors in particular... would create more certainty, which is what investors crave,” he said.

To achieve that, Russia could ratify the International Center for Settlement of Investment Disputes convention, which would give it a transparent mechanism for conflict resolution between investors and the state, Seligmann said.

Concerns about the state’s role in business affairs in Russia have intensified since a 2019 embezzlement case against prominent U.S. businessman Michael Calvey.

German Gref, the head of Russia’s largest lender Sberbank and a former economy minister, told Reuters this month that the government is working on an economic reform package.

“Geopolitical trends are complicated... but activity is really high within the country,” Gref said, referring to efforts to improve, among other things, the investment climate. (Additional reporting by Katya Golubkova; editing by John Stonestreet)